US stocks drop again on rate hike fears; British pound tumbles

Agence France-Presse

NEW YORK - Global equities fell Wednesday, with Wall Street dragged lower on worries about higher interest rates, while the British pound tumbled as Brexit talks with the EU hit another stumbling block.

US stocks dropped for the second straight session, as investors continued to digest Tuesday's congressional testimony from new Federal Reserve Chairman Jerome Powell that sparked talk the US central bank would accelerate the pace of interest rate hikes.

"Unfortunately, we may have to wait for first-quarter earnings to kind of break out of the cycle we're in."

Wall Street equities were also pressured by hefty declines in petroleum-linked shares following a bearish US oil inventory report.

The Dow finished down 1.5 percent.

Equity markets in Paris, Frankfurt and London all fell, along with Asian markets, which took their lead from Wall Street. Sentiment also took a hit with news of the third successive monthly fall in China's purchasing managers' index (PMI) survey of factory activity.

The index reached a 19-month low in February. That news weighed heavily on London's energy and mining sectors because the Asian powerhouse economy is a top consumer of raw materials.

The dollar continued its advance against the euro and moved sharply higher against the British pound after British Prime Minister Theresa May angrily rejected the EU's draft proposal for Brexit.

The EU proposes keeping British-ruled Northern Ireland in a customs union if there is no better solution to avoid a hard border with EU-member Ireland, and its chief negotiator said the pace of trade talks needs to pick up to reach a deal this year.

"The comments reminded investors of the long road and difficult road ahead for the Brexit talks and added to the pound's heavier tone against the dollar overnight," said Omer Esiner, analyst at Commonwealth FX.